Summer gas: Holding steady at $4-plus

There's a well-worn saying about California gas prices: They go up like a rocket, come down like a feather.

Prices have been floating downward in recent days, heading into the busy Memorial Day weekend and the traditional start of the summer road-trip season. But analysts say it's only a matter of time before they shoot back up, and history shows an unmistakable trend. Gas, over time, always gets more expensive.

It's hard to predict where prices will go this summer; one analyst called even the best forecast a wild guess. Prices have fallen the past two years during the late spring and early summer, but they climbed the two years before that.

"Usually, it pretty much holds steady," said Marie Montgomery, a spokeswoman for the AAA Automobile Club of Southern California. "We rarely see huge spikes or dips during the summer."

The average price for a gallon of regular unleaded was $4.05 in Orange County on Thursday, down a few cents from a week ago.

That may be the new normal, said analyst Charles Langley of the Utility Consumers’ Action Network in San Diego. “This may be the last year where you see gasoline in the $3 range, below $4 a gallon,” he said. His prediction: Gas stays above $4 for the summer, but below $4.40.

In the volatile marketplace of California gasoline, though, that depends on a long list of factors. The price of crude oil – rising in recent days – plays such a big role, for example, that analysts have blamed uprisings in Africa and unrest in the Middle East for past price hikes in Orange County.

Demand for gasoline has fallen sharply in California in recent years, but it’s the supply side of the equation that swings the market. California refineries usually enter the summer with their spring maintenance finished and their production high, but any disruption can panic the market. Last fall, for example, a fire at one major refinery and a power outage at another meant record prices for California drivers.

California relies on a small group of major in-state refineries for the majority of its gasoline, especially its cleaner-burning summer blend. One of those major refiners, Tesoro Corp., will soon take over a refinery and Arco stations owned by another, BP – a deal sanctioned by the state but challenged as anti-competitive by consumer advocates.

To ease concerns about a price spike, Tesoro agreed to increase its capacity by 400 barrels of California gasoline a day, according to the Attorney General’s Office, which approved the deal last week. But Bob van der Valk, an industry veteran and managing editor of the Bakken Oil Business Journal, said that amounts to what an average Costco station can sell in one day.

“It’s anti-competitive, and it will raise prices,” Langley said. “It’s that simple.”

For now, though, the deal could help stabilize summer prices, he said, because the refiners involved know they’re under scrutiny and will be sure to keep up their production. The refinery that burned last fall also drew the attention of regulators and should be trying to avoid the kind of disruption that kicks up prices, he said.

The traditional summer road-trip season begins this weekend, when more than 2 million Southern Californians are expected to hit the road. Those drivers, filling their tanks with $4.05-a-gallon gasoline, might not remember, but the same gasoline was selling for less than $2 a gallon less than five years ago, according to statistics from the California Energy Commission.

It was 2008, with the recession tightening around California, and gas prices collapsed. They plunged past $4, then past $3 and then past $2, bottoming out at $1.74 a gallon that December.

And then they started back up. In 2010, the average Orange County gallon of gas sold for $3.08, according to numbers kept by the auto club. The annual average rose to $3.80 in 2011, rose again to $4.03 in 2012 – and so far this year has been running right around $4 again.

But the peaks and valleys of that gradual increase undercut the old saw about rocketing rises and feathery falls, said John Felmy, the chief economist at the American Petroleum Institute. In the past two years, he said, the average U.S. price of gasoline has more or less come down as quickly as it went up. California statistics from the past year also show upward spikes followed by downward spikes.

Maybe, Felmy said, consumers just notice the price hikes more than the dips.